and decades happen. we're seeing that inflection in health care. >> dr. cosgrove, thank you. >> see you guys in jackson hole. >> have a wonderful weekend, everybody. we'll see if we get diggy with it in the markets. welcome. i'm carl quintanilla with melissa lee. david faber is off today. moderate weakness, of course, after a rough few days. got some durable numbers not too long ago. not bad. the lower, once you start to strip out the ex-transports, we watch a meeting coming out between merkel. dan greenhouse with btig and

cnbc contributor. a lot to get with with dan. >> absolutely. let's get to our road maps this morning. the markets reversal after four straight days down after highs earlier this week and now chatter about september. trying to batten down the hatches? >> and are the federal officials having any impact on what ben bernanke is going to say in jake s jackson hole next week? >> and you know who owns a lot of facebook? morgan stanley. first, the dow and s&p coming off the worst numbers in a week. all three indices are still in

positive territory with the dow clinging to some gains. but will september give the bulls something to threat about? we know september's seasonally week. there will be a lot more speculation about jackson hole. is there a good reason to get long into the weekend? >> our working assumption is we've had a terrific rally over the last four weeks. admittedly that's come every day whether the stock market has gone higher or lower. it's been better than we expected but it has pushed up to september. september is the worst month the. s&p is down by half of a percent and that's where jackson hole comes into play. >> so does a better performance this summer make you optimistic about what happens in the fall

or do you think that sets us up for more volatility? >> the rally has come as earnings expectations have come. you're seeing the s&p trading at somewhere around 13.1, 13.2 third quarter forward. where that leaves the market is susceptible to a downturn of disappoint apolicy and policy makers where jackson hole and i think ben bernanke will d disappoint. >> it's about the slow down in world growth. we know now, if we look at the data that we have, germany and france will be unable to stop that. the cbo yesterday talking about a recession-like scenario as a result of the cliff here. whatever the central makes may or may not do at the margin and in europe that's probably more

because they could save the situation or contain it, we're still going into a situation where growth is slowing quite dramatically. >> i agree entirely. again, in virtually any scenario the risks are almost always to the downside. you can't find someone that thinks global growth is going to top 5%. it's a nonexistent possibility at this point. but they can help mitigate that and that's where jackson hole comes into play. >> is it now evidence that they cannot move until december, until after we've gone through the presidential election? >> like evil kanievel, bernanke is going to try to get us over this cliff. >> central bank can do whatever they want and whenever they want to. beginning with that premise, i don't think there are political implications or inhibitors. with regard to the fiscal cliff, i don't think there is monetary

policy if the fiscal cliff goes off. certain things are going to happen in almost any scenario. i imagine the payroll tax cuts will expire. so fiscal tightening will occur. somewhere around a percent of fiscal tightening rather than the 4 or 5% dramatic scenario. there are not enough bonds to -- >> can i stop you on this idea that politics don't matter? politics are hugely important. if mitt romney is standing up on television and saying that he doesn't think that qe 3 is necessary and he doesn't think ben bernanke should be leading the fed and it can't even print money, that's a huge environment for the chairman of the fed to

embark on qe 3 and further risk damaging his institution, right? >> two points. first, with respect to the gold standard, there's a zero percent chance that the gold standard takes hold in the u.s. >> and yet it's in the debate. >> the gold debate goes back decades and decades. it's not going to be implemented. it's incredibly inflationary. and that said, i don't think ben bernanke forgets about the politics, he took incredibly and not going to be reapril pointed any way. he has a two month or six month window in which, for lack of a better phrase.

>> james bullard on cnbc and chicago fed president, charles evans told cnbc that the slow economy means the central bank should do more to help, including more bond buying. >> or not, as the case may snb. >> well, obviously we're having a little difficulty. >> it's called the nonverbal. that's where it is at. >> the fed should go back in there. we're left to decipher that. >> remember, this is not just about ben bernanke. there is the minutes, the overwhelming desire of the fmoc as a whole is to provide additional stimulus and if you want to take a lenient ruling of the minutes, it's hard to see how they didn't ease at the

previous meeting. >> they are waiting because of the politics, precisely the point that i'm making. why when they say overwhelmingly they believe they should move and move soon they do not move. >> there's a lot of people that agree with you. i don't know that they sat around the room and said, well, potential president mitt romney is going to do this. if he thinks additional easing will help, he will go for it. they wanted to see data in hand, and fortunately the data has been at least mixed but particularly lead by retail sales and the employment report has been better than expected so there's a breathing room which, again, brings up jackson hole and i think for most participants will be a disappointing speech. >> we're at multi-year highs and we're stalling going into labor day weekend which is the first weekend that begins september as a new month of trading. what do you make of this market

turn? is it simply a stall? are we seeing rotation that this market is broadening out and becoming stronger? we have seen, for instance, the nasdaq 100 reach levels that we haven't seen for many years. we're seeing telecom come off of the massive run. >> and over at the s&p 500, i guess since the fomc statement basically makes this a month to data analysis, it's been financials, discretionary, materials, and that's been a change from the proceeding three months where the defense has led the way. so you have seen a rotation. but, again, this has been primarily a function, in my opinion, of p.e. multiple expansion rather than upward earnings estimate revision and the market is susceptible to a downward move. >> we had art cashin on earlier in the week. was that the top, the medium turn top? is this a true reversal week?

>> nothing is going to surely get you more in trouble than picking the top of the bottom. >> that's why i'm asking. >> i would say that september is going to be a down month. it's going to be a weak jackson hole speech and the election, for not just the presidency but the senate as well, will become the dominant focus. >> hence all of the attention on missouri and akin. this is not an inconsequential race. our investors bracing for an upset from the fed? joining us with more on this is ira. good to see you. >> thanks for having me, carl. >> as for this rally at 1670 is going to continue, you think it will. why? >> oh, i do. i think the market's got the best ahead of it. typically from a seasonable basis, you get a surge in the

gold. you get a tendency for the markets to rally. the reasons are even more this year. you've got the presidential election. you probably do have a september that is going to be weak in the stock market. we've got two stimulus programs on the table between china and the u.s. europe will probably kick the can down the road but in the end our research is showing lower dollar. we think the dollar is going to break even further. there will be a race on the lower interest rates around the world. everybody is going to scramble to boost their economies and gold will shine because of that towards the end of the year. we spent a summer going know where now the market is breaking out. >> and gold bugs always like to hear about the asian marital season, right? >> monsoon season you get it coming in, indian season begins now. you add that to the market and that's the fourth market. then you've got the gold standard market and whether it happens or not, it's on the table and that hasn't been on

the table in a long time and the first hurdle is, can the republicans win? if they win, that table won't go away. if they lose, i don't think the democrats are going to do anything to rein in this spending. i don't see that at all. >> ira, what is the next stop because the gold breached the 200-day moving average, 1640s or so. what should we be looking for next? >> i think right now you're looking for a consolidation about to take place for the next week or so and i'm looking for the 1750 area to be hit in the gold. i'm looking for roughly an 80 to $100 rally between now and october to set in on the market and i would peg around the end of july prices to be the support zone. >> all right, ira. thanks so much. have a great weekend. >> thank you. u.s. mutual funds run by morgan stanley, which is the lead underwriter in facebook's ipo, we learned have disproportionately high investments in facebook. the tracking morning star shows

that morgan stanley runs now eight of the top nine facebook shares as a percentage of total assets. the question here is whether the fact that it was the underwriter led those mutual funds into a place that they otherwise would not have been? >> some discussion about where they got these. some of them might have come before the ipo and would not have been $38 a share and which case the losses might not have been mitigated. >> the other thing is, there are plenty of other institutions that were large holders of facebook, fidelity and the concentration of facebook in the top holdings of their mutual funds are far less. typically 1%. 2.85% in the toll keeper fund but for morgan stanley funds, they were up there. 5.7 on the focus fund. 5.5 in the opportunity fund. you have to raise your eyebrows and say, was there at all a conflict of interest? the journal in their report

makes it clear that no rules were violated in any way but was there an ethical obligation for morgan stanley funds not to take on this concentration of shares? >> i'm glad that you said that. the journal does specify that they have no evidence of wrongdoing or shady dealings and also does say that they have fairly large positions and a number of other similar type names which will, in the case of linkedin is is performing much better. it doesn't appear to be impropriety if that's a word. >> morgan stanley's fund website would not have said at the end of june that the leading detractor in the portfolio of this quarter. i mean, the impact on this is clear. >> hindsight is 20/20. but i guess if you were in the environment and the people around you generally were very

bullish about facebook, then you would send your -- >> except for the analysts that took down estimates for the ipo. >> it's clearly working, then, if it didn't make its way to the mutual funds. >> i will say, when people talk about how wall street is -- i don't know what the right phrase will be -- but doing a disservice to the public at large, it's important to reiterate that a lot of people on the inside, that is, people that speak on the street, have an incorrect view of facebook and its potential growth and a lot of people that i know. >> and institutions were primarily the buyer of these morgan stanley funds as well. it was an indirect impact. >> the applications on the iphone, have you downloaded that, it's rewritten the code and it's ridiculously faster. it's an incremental towards

mobile, making these things -- >> and ultimately that's the biggest problems for these companies monetizing mobile. when we come back, we'll meet a former apple executive that's creating digital textbooks for the ipad and other pads. and tracking isaac. it could become an you will welcome visitor to the rnc next week. one more look at the futures on a friday. we'll see if we can close on an up note when "squawk on the street" comes back.

tropical storm isaac could reach the shore by monday which is when the republican national convention starts. good morning, jen. >> good morning, carl. it looks a lot more impressive on the satellite. you can see the striations out here indicating the outflow and that means that it's strengthening. the hurricane hunters have been flying through it and they've found winds at 50 miles per hour. as you look at it the next couple of days going over the island of cuba, that will weaken. we forecasted through this area and then potentially impacting south florida regardless of the track, it's a big system and it's going to bring a lot of wind and rain to south florida by the time we get into sunday and monday and then we track into monday right here in the gulf of mexico. the longer it sits there, the potential to be stronger. we're predicting a category 1 hurricane and having an impact

from coastal louisiana and it's unlikely to be a direct impact to tampa, it's going to bring a the lo of rainfall because it's so big. the gerth is nearly 500 miles. the winds extend out about 185 miles. concern is for gusty wind and rain. tampa, in particular, has been very wet. they've had more than 30 inches of rain so far this summer. rainfall will occur regardless. >> jen, thank you so much for that report. >> why do you arrange to have a convention in florida in the middle of the hurricane season? >> 29 electoral votes is a start. >> okay. just saying. members of a thai-buddhist temple say that they know the

remains of steve jobs. they say his half knowledge seeking angel, half giant. if you could meet one of history's foremost past business leaders, who would it be and what would you ask him or her? st will reveal your answers throughout the morning. >> he spent a lot of time meditating. you would assume that he would have ascended to be -- >> he's still working his way up. >> also, how about the half yck part? >> yack have feelings, too. >> says simon. >> good morning, yacks. coming up, the social media shopping connection meet the head of a start-up that you consider to be a yelp for the grocery store. looks like a down day across the

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we are six minutes before the bell this friday morning. let's bring dmi securities and market analyst. good morning. >> good morning. >> if we fail here at 1400 and go down, how much of that a problem will that be for the market? >> there are a few key levels. 1397 has been a difficult level we hit yesterday and bounced off that. we have another level 1393, only four points lower. before that, i would say you're getting to 1387. >> what do you -- >> i'm not suggesting that we're going to get to any of those but if we do it opens up the window for the big downside move. >> what do you make between the breakdown of the euro and u.s. dollar in the markets? >> i don't know if it's permanent or not. i hope we start to break away from that dependency. i think it will be good for u.s. equities and my rationale is it

was easy when that correlation was so strong to change the macro picture so easily. once it breaks, you've got to go back to the fundamental level. i think if we break that correlation, it will be beneficial to those that can pick stocks here in the united states. >> are people talking about jackson hole like it's going to be meaningful or not? >> i think the only thing they are looking to get out of bernanke is what type of measurement they are willing to do first. they opened up the window to do something sooner rather than later but did not describe the five of the eight choices that they had. i think people are gleaming for a hint of it initially. i think that's what people are looking for. >> thank you, warren meyers. >> my pleasure. we'll get the opening bell and all of the market action next on "squawk on the street." ?

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here at the big board, the opening bell just a couple seconds away. here at the nyse, motley fuel, invest better. a nonprofit offering camp experiences for children with autism. the dow had its biggest loss in four straight weeks. we were talking about multi-year highs and there was that undercurrent that things were overbought, at least in the near term. tuesday came around and then here we are four days later. >> factor in the fact that we've had light volume and that throws into some question how the highs were made and, to be fair, the data or art cashin made a point that it was made on very light volume. from a technical perspective,

outsize is not as important if on light volume. >> we should also say that the reversal was confirmed on other asset classes and that's important if you see the way that treasuries have rallied, that gold -- it was again and again and again. so it may be something that is more permanent and at this 1400 level on the s&p, just above that which was major, major technical level. >> and jim bullard made a very important point when he talked on "squawk box" about what form qe 4 will take. looking at previous qes in terms of form and judging what should be happening now. i can say that i'm having numerous conversations with clients about taking a look at and analyzing previous moves in terms of gauging what future moves may be.

>> let's take a look at the futures. this has been a monster in terms of the upside. adjusted earnings coming in. better than expected third quarter guidance below analysts expectations. deferred revenue was disappointing. we're going to have an analyst on. this is your buying opportunity again. the context of this move today is that year to date the stock is up 45% for the month of august alone it's about 18%. we'll see if that is a buying opportunity with the analysts there. >> right. some of the guidance difficult for the current quarter. the year is optimistic but you have fx issues going on, slower tech spending in europe. >> they changed their subscriber model. it's a one-year model in terms of subscriptions. we'll see how much all of this -- >> it's a very aggressive push. it's an aggressive position for them to take.

that could be firing back. >> the price war is hurting margins. on "mad money" there were interesting things to say. how about msg? 9% gain earlier this morning. profits triple. >> better than expected for the first skal fourth quarter as well as the revenue side. that's a huge mover in today's move. lilly is up 5.5%. two large studies showing the experimental alzheimer's drug which slowed the decline of mental cognition in some patients. analysts were saying there's only a 20% chance of this drug showing any benefit. even though it failed to reach the end point of these two studies, it was better than analysts expected. if this drug is approved, it could be transformative for eli lilly. that could combat the seven

million drugs going off patent. >> lilly is at the top. >> two big drugs are going away. >> simbolta over the next five years. so this could be big news for lilly. we should also check on apple. apple losing smartphone market share in china. it's down .04%. not a huge move. we have the thai buddhists believing that they have found the late steve jobs half angel. >> do you want to get to pisani? >> bob? >> this is the lilly post, which is up 5.5%. there was a huge crowd here as a

result of the alzheimer's drug that melissa just talked about. the chinese stock market, the shanghai index hit a new three-year low. we've been waiting for that to happen. there hasn't been a positive catalyst for china. the issue has been, is there anything that is going to turn the chinese market around? top line growth is slowing for all of the chinese companies. you think we have weak top line growth, we're doing 2%. the chinese is down for their companies in the big index. they were doing 20%, 25% just a year ago. 10% sounds great because it's half of what it was a year ago and probably go down even further in the third quarter. you know about global demand slowing. did you see the front page of the "new york times" today? the chinese factories are piling up large inventories of unsold goods and that -- we've been talking a lot about the voracity of chinese statistics.

they said the chinese government officials apparently are either ignoring or hiding data. the agency in charge of releasing data on car registrations has stopped releasing the data. it's not that they are lying, they just stopped releasing it. we don't have data on the vacancy rates of apartment buildings because the chinese government has stopped releasing that as well. so that's an issue that's been sitting out there. the stimulus issue is a major point of con sengs over in china right now. local chinese government officials are still very much in debt. the local governments are in debt. you know how they made their money? on land sales. they sold money that the developers sold inflated prices and then put them into stimulative projects. the projects they invested in are not making enough to cover the debt payments. that's a major problem. there's an issue about how much stimulus is available. a couple of cities this week,

for example, announced big stimulus plans but apparently they are not doing it themselves. they are trying to bring in outside investors. there is not a lot of money to engage in the stimulus plan. the one thing that everybody is debating is changing the real estate rules chls they've cut down on real estate development, on the ownership and it's worked. it's brought down real estate inflation. it's also brought the economy to a halt. there's not a lot of investing going on in real estate right now. the big debate is, should they lift those restrictions that are out there? it's not clear whether or not that's actually going to happen. let me move on and talk about spain. we had thought cabinet ministry meeting that maybe there would be some announcement about some negotiations that are going on with the european union for additional bailout money. there wasn't anything. there was a little bit of a disappointment. in fact, the deputy prime minister specifically came out and made a statement that we're having no negotiations. he emphasized, there are no negotiations with the european

union right now other than the aid for banks. that's the $100 million. a lot of people anticipate them to say we are now in negotiations i would trigger the bailout funds or potential bailout funds going to spain. so far there's nothing on that. i think we're going to have to wait for more information. guys, back to you. >> all right. let's go to the bond pits. rick santelli is in at the cme. >> good morning. the trends especially in the fixed income markets since july 26th to mario and his verbal comments. look at the 24-hour chart of tens. we know that the durables number, for the most part, was weak and you can see that reflected if you pull back to a three-week chart, that pretty much encapsulates, down 5 on the day. let's see if our counterpart in europe is acting the same

pattern-wise. it is similar but all of a sudden it's starting to rally pushing the rates down. if you open it up to august 1st, you can see this 133 yield that it's hovering at now would be the lowest yield for august and the last chart is only one week but you can see it hasn't been a great week for the dollar index and the euro is up on the week, even given all of the issues like spanish yields and "the wall street journal" pointed out the dynamic moving the euro has switched a bit. is it a corrective mode? we're not sure. but we'll monitor. melissa lee, back to you. >> thank you, rick santelli. checking in with jackie at the nymex. jackie? >> good morning. we're watching wti but moving slightly below the 200-day moving average. that was the first time we did that since may. we're going to be watching those

prices carefully. sagging global equities, we've got lack of direction, lack of clear direction on monetary policy. the catalyst today, we're looking at news out of europe regarding greece and also the iaea investigators are working with the iranian diplomats. meantime, watching gold closely as well, slightly lower but it is above the four-month high of 1670, hovering around there and we did see that it was climbing on wednesday and thursday on hopes of more fed easing and also reports that spain is negotiating this new bailout package. last but not least, we could see headlines in gold today, news that the gop might be doing an audit of monetary policy or they are going to suggest it, also suggesting that a commission look into the gold standard. again, we could see action in gold today. carl, back over to you. >> jackie, thank you so much. jackie on the list of big movers

you've got to point out auto desk. talked a lot about software and technology today. qe 2 looking at four to six versus previous estimates of ten and stocks down 18%. >> i think one of the big issues is that it looked like part of the quarter's miss was self-inflict d in that it switched from a geographic sales model and they say that caused confusion and a lack of decision making. we're seeing this impact on auto desk down 18%, wiping away the past year's gain. the stock is up 35% over the past 52 weeks. shares of adobe as well, adbe is down 4% right now on that. >> can i mention the broadbase move lower on energy and materials, almost across those sectors, oil doing okay today

but still it's off of yesterday's move. >> amazon is one to watch. they are going to have an event on november 6th. the rumor mill churns around a new kindle. >> so much speculation, the fact that it's being held in an aircraft and may involve space. but more talk about it being a premium content being released. >> that would probably explain the margins. coming up, salesforce.com wrapping up a big week on tech earnings. we'll explore whether or not now is the time to get in. as we head to break, take a look at this morning's early movers on this friday's wall street. at optionsxpress

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want to take you to mid-town manhattan which is a scene of a shooting. we're being told by nypd that at least four people have been shot outside the empire state building. a fire department spokesman received a call about the shooting about 45 minutes ago, 9:00 a.m. friday, and that emergency units were on the scene within minutes. also being told various reports that traffic in mid-town obviously snarled. comes on the heels of some shootings in chicago yesterday and last night. any further details, we'll get them to you as soon as we can. >> we will. in the meantime, let's take a look at the markets and look at salesforce.com which topped

expectations yesterday after the bell but it's the widening losses that is catching wall street's attention. shares are down 1.6%, certainly paired its losses from earlier in the session. on the phone is joel fishbein. let's start off with you, joel. you look totally and completely through the lower third quarter guidance. why does that not concern you? >> two things. good morning. first thing is, that the company -- the open i can particulars were that the company had about 31 million in revenue and fx impact. in other words, they had a currency impact that impacted the guidance as well. number two, they had shown strong cash flow strength and the analyst day dream force in september where they are going to give details on their

marketing clad which is adjustable market by roughly $3 billion over the income five years. so despite the optics, i think the quarter was very strong and guidance was very strong. >> optics is important and the optics for salesforce.com is that it has been a monster mover for the year, up 45% and it's showing perhaps some signs of slowing. 29.7%. it was a little bit above consensus estimates but it is below 30% where, it has been for seven of the last eight quarters. for somebody who is in this stock, isn't that enough to think that perhaps now is enough time to lock in some gains? >> well, i think as you look forward it's important to look at the unbilled and the billed in terms of overall revenue. looking at the off balance sheet backlog, that was up 50% to 4.1 billion so i think that's enough to keep investors in the stock and we should get back to that

30% kind of billings growth rate. i think as joel mentioned, foreign currency was a major headwind and as you look at europe, it was up over 40% but once you take the translation risk into effect, it was only up 22%. so it's really more of a translation risk issue, not really a demand issue. >> joel, on the conference call, mark denny, the ceo of salesforce, boasted essentially that a buddy handles 10% of facebook's ad spending. how much will we see that in the bottom line and when? >> i think it's going to be probably next year that we see it materially impact cash flows. it brings them into a new area of cloud computing which is the social aspect of that and they are handling 10% of facebook's

ad revenue is a sign of things to come and we're going to see that and it continues top acceleration and probably midpoint of next year. >> and robert, i want to switch gears just a bit. adobe systems today feeling some impact from the auto desk miss. what is your view on that? >> well, i would say when you look at the two companies, adobe's going through a transition from a subscription or to a subscription model and they've been kind of on this path for over a year and auto desk is just starting to enter into that same phase. so, you know, auto desk has a little bit farther and a little bit more time to go here. adobe is getting through their transition thicker and i think you'll see that show up in the results, specifically when you look at the subscribers on a per weekly basis. we expect that to accelerate for adobe and we think auto desk is

embarking on it and that's why you're seeing the major weakness. >> guys, we're going to leave it there. thank you for your time, joel and robert. when we come back, members of a thai buddhist temple claiming they know the whereabouts of steve jobs, leaving in a parallel universe as a mid-level angel. >> yes. >> our question to you, if you can meet one of history's foremost past business leaders, who would it be and what would you ask of him or her? tweet us @cnbcsquawkst. we'll get your responses later on. big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha! and i'm here to tell homeowners that are 62 and older about a great way to live a better retirement. it's called a reverse mortgage. [ male announcer ] call right now

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members of a thai buddhist temple claiming they know the whereabouts of the late steve jobs. they claim he's living as a mid-level angel living as a half

yak. what would you ask him or her? stefan writes, jpmorgan, i would ask them where the money is at. and john rockefeller says about the oil industry. and howard hughes, can you get a flying boat to run on nat gas? and alfred k. stock, which would you ask, the chicken or the egg? a german chemist who did some pioneering research in mercury poisoning, things like that. our viewers are always marter than we are. >> the most essential of all elements. >> that's not bad either. a couple minutes left here, dan. you've been pretty stubbornly, i would say net bearish through the summer. has that been trying for you? >> i would say the threading of

a needle -- and we thought the market would appreciate. our assumption was by the end of september you would be flat. where i'm going to be wrong is that september is not down. i think history suggests that. i think a letdown on the part of jackson hole. when you get to the fed meeting and other items that come into the middle of the month, there's ample room to take this policy back down into the mid-to upper 1300s at which point we'll reassess to the end of the year. >> kind of looks for central bank catalysts might go away empty handed if jackson hole is a dud, if the ecb do nothing about this ruling on the 12th. their meeting is on the 6th. >> in the case of the ecb, you could probably make the case that it is a done deal tha, tha they are going to do nothing at the next meeting. i think where consensus will

eventually center is on the final paragraph of the fomc statement. if it simply reiterates that, i don't think it will be for long enough. >> for longer term investors, do you think the market is looking increasingly overvalued? >> let's go on record to say i will not be surprised if, let's say, in the next six quarters that it's trading at 1,000. >> a thousand? so you would be dealing in all cash? >> if my time frame was three to five years. i don't want to be the strategist that says, run for the hills, own gold and cash, barack obama is a socialist and there are reasons to play the stock market on a shorter-term basis and i am trying to do that. however, i think recession is more frequent, cycles are shorter and the risk of a policy is a perfectly normal 20, 23% drop in a stock market that gets you back to 1100-ish.

which by the way was at 900. i've had to take it up as earnings have gone up. >> good times. >> dan greenhaus, thanks. coming up in the next hour on "squawk on the street," we're going to talk about the possibility that finally dollar thrifty takes over hertz. we also have a new survey on the iphone 5. who is intending to upgrade and what that could mean for apple shareholders. that's all ahead in the next hour on "squawk on the street." in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. looking for a better place to put your cash?

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good friday morning. the market coming off the worse day in a month after hitting multi-year highs. with jackson hole, are we heading into a september to forget? >> eli lilly failing to reach testing goals that the company set out for it but the company is trading higher today. we're going to delve in that disparity and talk about the potential of that future treatment. prince harry staying home as he capitalizes on his royally embarrassing mistake. when you're cruising the

aisles of your local grocery store, how do you know which organic cereal is good for your kids? you ask the internet, of course. a site that helps you eat and shop smarter. >> stocks on track to see the worst weekly performance in 12 weeks. let's bring in scott ram, senior equity strategist, drew, managing director with ubs. guys, great to see you both. scott, where do you think we are in this market advance? >> well, melissa, i think we're running out of steam here and really we had been looking for the market to trade up to the level of some resistance there. we've come a long way. our year-end target range is 1300 to 1450. so i think what is going to happen is we're likely to have some sort of pullback. i think it's likely we have some sort of headline out of europe where we're not buying bonds

until maybe next year, something like that. i think we could easily trade down to, let's say, the 1330 level, something like that. but on any of these pullbacks, just like the ones we had earlier, we want to be buyers. >> all right. and i'm just wondering, in terms of why we are running out of steam, is it a technical pullback? a technical stall? or is it because we haven't gotten something specific from either the fed or the ecb? >> well, i think it's a little bit of both. i think it's a technical situation but i also think the market has quite a bit of anticipation built in that the ecb is going to be buying bonds very soon that the fed is going to be doing things and announcing at the september meeting. but the ecb is the big wild card and i just think that the market is ahead of itself. valuations are excessive but for us and the work we're doing, this is about where we ought to be at the end of the year, not in august. >> drew, what's your take on where we are?

>> well, i would say this. we're counting on central bankers for everything. i think there's a real problem here with how the fed set this up and how people are perceiving it and trying to run with it, which is the fed is looking at what the equity market is expecting in terms of policy and what they expect for policy and they are just feeding on themselves and eventually one of them is going to be very disappointed. >> you know, it's interesting that you said that. i got that impression that when bullard spoke yesterday, he was actually trying to inlt veterved change some of the mark keet players. >> i think one of the main problems is that there are too many economists and not enough markets giving them information and back in the day they used to have a lot more market savvy folks running the show. when they are trying to communicate, they are trying to communicate as economists to

other people. it's very hard to understand me when i talk and i think the fed is feeling that exact same thing now and trying to talk to market participants. >> your family's being way too hard on you, drew. that's not fair. >> they are a tough crowd. >> that said, what are your expectations for next friday? >> i think bernanke has got to lay out what they would do if they need to do something but he's going to hold back on promising something, largely because when you think about what a substantial improvement means or sustained improvement means, back when they made that statement there were two payroll reports to get to. one of them has turned out okay. if the next one turns out okay, the qe is off the table until january. >> scott, you said something interesting. the fact that you believe that any pullback in the market is a buying opportunity. why is that? >> well, simon, the word that we are doing says this economy is going to continue to grow at least through 2014. i think this global economy, obviously it's slowed. the recovery is going to

continue. i think we have positive things. some of the things we've been doing lately suggests that over the course of the next two years you could see the s&p up 15% total from here. so the work we're doing suggests that recoveries are going to continue. we want our clients in those sectors, those industry groups and ultimately those stocks that are going to react positively from a good ebb and flow of the economy. so really it's a bit of work that we're doing here. i don't think we're going to have a big pullback and i don't think the economic recovery that we've seen still has some legs and we're looking for the second leg up in the cyclable market. >> on the other hand, when we turn to jackson hole, german court dates, et cetera, is there -- are there changes to your portfolio that you would recommend at this point to sort of prepare for this volatility and we're seeing the vix curve

say that there will are be volatility in september and october. >> we're overweight technology, we're overweight materials because we want to take advantage of this pullback but we're also overweight telecom services. so we're trying to mix a few defensive sectors in there. we don't want our clients completely hanging out there looking for the market to run hard which would be a total cyclical sector. so i think coming into september -- and there's going to be lots of volatility, especially around the 12th when this german court decision comes. but we want our clients to be leaning cyclically and when we see a pullback, we want them to have the nerve to step in there and increase their positions. >> all right. scott, drew, thanks. have a great glead all rigweeke.

>> all right. thanks, guys. here's a chopper shot about midtown manhattan. at least four people have been shot and the shooter is dead. our affiliate here in new york is reporting that the shooter was a disgruntled worker. the empire state building, of course, one of new york's popular shooting attractions. the shooting occurred shortly after 9:00 a.m. eastern time on a sidewalk outside of the landmark building. >> from a tourism perspective, this is clearly extremely bad news for new york, for that to be carried international around the world at a time when the travel and leisure industry was attempting to attract foreigners to new york and to the other tourist attracts around the united states. this is a devastating blow. >> and coming on the tails of aurora, wisconsin, many, many shootings last night in chicago, and now this today. we do expect the mayor to make a

statement later on this morning. a fierce advocate of gun control but clearly the news has hit him in his own neighborhood today. >> okay. let's move on. after the break we're going to talk about eli lilly rising to a two two-week high due to the alzheimer's drug even though the news is not what lilly had hoped for. what it means when we return on friday morning on cnbc. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, it could save you thousands in out-of-pocket costs. call now to request your free decision guide. i've been with my doctor for 12 years.

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watching some of the drug stories, eli lilly trading higher after disappointing sales in trials but showing cognitive decline in those mildly affected. joining us is myrtle potter, also a cnbc contributor. myrtle, good to have you here. >> good morning, carl. >> we've seen bad news from pfizer and j and j in recent weeks. is this in that camp? >> i actually don't think this is in the same camp. this trial was really very interesting and what stands out for me in this trial is that there were end points that showed promise. now, what you don't want your primary end points to necessarily always fail, the secondary end points say that there were things that the trial

was looking for in addition to the primary end points that actually showed some promise. so i'm hopeful. >> and i'm sure eli lilly is hopeful for approval of this drug ultimately, myrtle. what can lilly do, because the drug did fail, to primary goals of the study? what can they do to navigate it through that path to meet the primary end point goal and then get approval? >> well, you know, i certainly i don't know what eli lilly plans but in the situations like this, detailed discussions with the fda will be very important. you have a disease that is so devastating with over five million americans affected by the disease and right now the big thing is that there is nothing that really does slow

the progression of the disease, which is the goal. there is no cure for alzheimer's. so given that the high medical need still exists, the i would think that the fda would be willing to engage what to do with the data and how to think about other trials or adding to the school of data to see what might be possible. >> but the indication is that patients would have to take this when they first demonstrated symptoms of alzheimer's on early onset. that's important for, let's be blunt about it, the profitability. presumably that means it's going to be very widely used very early on. this is a potential blockbuster, even if it's just slowing the progression of the disease in the way it will be administered. >> so just to be clear, a slowing of progression of the disease is significant in this disease. and if in fact they find a path

forward where peashents can be easily identified and if in fact they have data that shows the drug has some promise in making a difference in patients, then, of course, the number of patients using the drug ends up being quite large and, of course, given how long we live now, the numbers could be quite large. >> myrtle, as someone who has done this for a living, if you are running a company facing large expiration of patents, is alzheimer's your best bet in terms of what to chase? as far as diseases go, is it a relatively risk of reward ratio? >> so to be clear, alzheimer's is very risky. there have been many companies that have tried and failed and developing drugs for alzheimer's. the drugs that we have, while showing some promise, there's always room right now for more

effective agents. so you can't overstate the risk of trials in this area because the field is just littered with those drugs that haven't made it. but on the other hand, these results are very promising. the need is great, the fda will be interested and to the extent that this drug can show some promise, even if it's modest, i think it really does mean a lot. will mean a lot to j and j. now, in terms of where they should be putting their money overall, when you have a drug like this with such promise that works, you're not going to give up on it. i would not be surprised if this company doesn't aggressively pursue this agent, given the medical need. >> well, the street is obviously trying to look at the glass half full, myrtle thank you so much. >> thank you, bye-bye. when we come back, is the marriage finally going to happen? reuters reporting that hertz is

testing the water for a fresh bid to acquire its long-time rival dollar thrifty after courting that rival for two years. we'll talk about that in two minutes. hi. i'm henry winkler.

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well, reuters reporting that they're tea dollar will take over hertz at more than $87 a share. it's currently trading below 80. that would be a significant premium. you could make money potentially from this deal. kayla tausche has this deal. >> simon, wouldn't you buy in if you sold it at $41 a share? investors on either side would be happy to see the end of the road here. many investors telling me that they expect an announcement within the next ten days even.

the saga first started in 2010 when they valued a deal at 41 bucks a share. the stocks up sharply since then. even though avis dropped out and hertz withdrew the formal offer late last year. it's been a lengthy review at the trade commission over whether combination would threaten competition and pricing. the sale of the advantage unit which is said to be bought by you save between hertz and dtg in certain areas. hertz had an option to put the ftc on a 30-day clock to force its hand on a decision within that time frame but my sources say hertz decided against doing that. and like most companies and government agencies at this time of year, a few of the necessary ftc commissioners are out on vacation. the companies, though, are optimistic for an outcome. either way, it leaves investors hopeful that it's an eye for a

deal. companies reaching out to investors on price expectations. unclear where exactly it will land because this has been going on for so long and the price rank has been so wide during that time. simon, some hedge funds are joking that they have bets and you can imagine people might think that they are on castaway or something. >> it's been so long coming. the possibility that there may be a hostile attempt here, it's not necessarily in the bag? >> it's certainly possible. they don't have an agreed deal on the table. if you remember where all of this began, when the deal first started, it wasn't a great deal. it was a signed agreement between hertz and dollar thrifty. if they were able to get to that point two years ago and dollar thri thrifty is up, you would think it would be possible to come up

with a deal now. >> what about avis? >> they made it clear they were dropping out of this race. seeing where dtg price has gone, it's gotten extremely expensive when these rumors come out you see hertz shares jump and because of the way that it would actually fit into the company i think avis has just said at this point, from what i can tell, it's too expensive. >> kayla, we're going to talk to a guest in a minute but let's pretend we actually do get some news and address concerns that are minimal? >> they are minimal. and that's what we are waiting for, carl. it's been going on for two years. even when hertz withdrew the offer. they were still negotiating with the ftc to figure out how this would actually work, what they would need to sell off and therein was how the advantage deal ended up getting struck. the expectation is when the commission hers all get together and return from vacation and vote on this, there would likely be an optimistic outcome. that's the expectation here.

>> anyone who has rented a car probably could see the lack of overlap, right? hertz doesn't have the real leisure component. >> i think the issue here, kayla, correct me if i'm wrong, is the concentration around the airports. that's the main concern that the regulators had. >> that is correct. it was also in some specific regional areas, of course. that's what the regulators look at when they evaluate these types of deals. very, very specific geographical markets, very specific vertical markets like airports that you mentioned. they are focusing on very small pieces of the business and if hertz can find a way to sell them off, they would be in good hands. >> kayla, we're joined on the phone by fred lawrence. good morning to you. how can people make money from this situation, in your view? >> well, right now i think, as your guest just said, thrifty is trading pretty significant below where we think a deal would get

approved by shareholders at this point. i'm thinking upper 70s or upper 80s, low 90s. some decent upside there. it could be a quick pop in dollar thrifty and also the acquisition by hertz should be hertz earnings, and you could get an upside there from the 20 to 30 cents that you could get with the acquisition. >> to be clear, you do believe that there's 15, possibly 20% upside if you buy dollar thrifty know? >> yes, there could be. if you read those articles and you're like me and talk to the large shareholders in dollar thrifty on a regular basis, you find out that no deal gets done unless we are talking about a price that is probably above $85. >> and there's sufficient value for hertz at that level? >> sure. i think so. the rental car industry in general, except for dollar thrifty that has a premium deal baked in, they are trading at

low multiples that we don't normally see in times when both the top and bottom line are growing nicely. so, yes, i think there's certainly some upside for hertz and with a deal that most investors would be pretty positive on. >> and the final deal on the regulator, the role of the regulator here? >> the final role is i think the ftc is probably frustrated with the fact that this process has gone on 2 1/2 years and they are as motivated as anybody in the process to come to a quick conclusion and my best guess is, you know, it will be won that proves this deal from an anti trust perspective. >> it must be challenging, fred, to be on this where you've got so many would-be mergers yet to happen. what do you think happens first? >> amr could be another month or two so hopefully in the the next couple of weeks before hertz hosts the big investor day up in new york, we have a rental car deal to talk about. >> yeah.

and actually we should let people know, you've said to one of our researchers that you were tired to talking to people about this deal that's been so long in coming. >> naturally, we got you on the phone immediately. >> that's right. thank you. >> thank you for joining us. have a great weekend. >> thanks, guys. all right. r.w. buri r.w.baird out with a new and is this game over for an droids and samsungs of the world? we'll go over that in just a few. drive a car filled with as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. if you want a soft bed you can lie on one of those." we provide the exact individualization that your body needs. welcome to the sleep number store's biggest

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one hour into trading, some of the stories that we're squawking about, salesforce.com sliding today after the company's third quarter earnings missed the street's estimates. blaming fluctuations as key catalysts. general motors setting high hopes on the cadillac. it will release the ats, a compact luxury sedan. the new ats will have an entirely new rear wheel platform. general growth properties, largest shareholder saying it has no interest in selling its 40% holding nor is it it trying

to buy the mall operator outrig outright. we want to update you on the latest shooting in new york. mary thompson has more. >> simon, unfortunate news. the shooting has claimed another victim. two people are now dead in the wake of that shooting, including the shooter killed by police. this is according to the new york police department. there are eight people who have been injured, some of whom have shooting related injuries. we're not sure of the exact number. that number also coming from the nypd. at 11:00 eastern, there will be a conference held by mayor bloomberg and ray kelly. we will monitor that for any additional information on the shooting. melissa, back to you. >> thank you very much, mary thompson. a new survey by r.w. baird, 40% of people up for a phone upgrade will choose the iphone 5. joining us is senior business

editor jason. great to have you with us. this confirms what we all thought, that the iphone 5 is going to be huge, huge seller. >> yeah. it's not a huge surprise. even when the 4s came out, a lot of the critics were complaining it wasn't a real upgrade. they were expecting an iphone 5 and it was just iphone 4s. they sold like 4 million. >> was it suri? >> i don't think it was suri. i think people were hoping for a model and when the 4s came out, they said they were not going to wait another year, i'll dive in. >> based on these sorts of surveys, perhaps the more interesting part of the survey is what this tells us about what remains of the land grab for the rest of the players, like google, r.i.m.m., and samsung. r. r.i.m.m. customers had almost no

loyalty. how do you think the landscape shakes out with the iphone 5 in there? >> what apple has done, you don't just buy a phone. you buy an entire system. you buy an ecosystem. it's not surprising that people don't want to leave apple at this point because once you commit to the iphone, you've got your photos in there, your music. now with i cloud they are tethering you more tightly. usually when you switched to a phone, the worst thing you had to do was update your contacts but now you have to change everything about your life. customers go in but they don't go out. androids are trying to do the same thing. r.i.m.m., frankly, just can't compete with that. >> is it the sense -- is it your sense that the biggest competitive threat is samsung at this point? we got news out of the south korean court that they are stealing from each other. >> the patent question is a good one and there is so much unknown

about this. the system is so broken. they are looking to the courts to see how this all shakes out and who gets to protect the intellectual property and what that means. however, that being said, intellectual property only goes so far and apple says it's about the tiny details and executing on those ideas so precisely that i think that stuff is very hard to copy. >> can i mention that nokia is launching a new phone with windows 8 in a couple of weeks. you know, it's written off before it even gets here? >> people have been very excited about the windows 8 phone. >> thank you. >> is it cheap? >> even outside of microsoft? >> yes, even outside of microsoft. >> is it cheap? is it what young americans are going to be forced to -- >> it could be very low? >> it could be. i would argue that it's going to compete w compete with apple. >> the carriers can't be too

thrilled about the 5? >> for carriers the ideal situation is that somebody buys a phone and never give it up. that doesn't happen. when apple is releasing a new phone every single year, everybody wants the knewest pho newest phone and all of these phones are able to do so much more that they are going to end up consuming so much data, putting more of a tax. that's been a challenge for all of the carriers ever since it was launched. >> we've been watching apple and google try to separate their ecosystems, whether it's through maps or various other applications that apple is going to try to do on their own. is that dangerous? are they more valuable working in concert or do they always have to get a divorce at this point? >> that's a good question. i actually think that that's a little bit overblown. i don't think apple users are going to say, well, i really wanted to use google maps so i'm not going to get an iphone. you're still going to be able to use google maps. that's not going to be a huge

fact for. >> so for people sitting on apple, at what point should they get word? they sit in there. 70% of the profits on that one model. what would be an indication that actually now from all of the things thaw study, from all of the conversations that you have? >> well, what would i say is that i think the first quarter sales of this new phone are huge, hugely important. if you looked at last year, iphone sales went up quarter to quarter. this year iphone sales -- >> full quarter? because this is going to launch and it's only going to be partially in a quarter. >> so full quarter to full quarter. if you look at what happened with the iphone 4, when they announced the 4s, sales were going up every quarter. after they announced the quarter, it went down quarter to quarter. >> what is happening is people -- it's becoming more of a hollywood blockbuster scenario where you need to have a first

day hit. people wait for the next phone. i think you need to see a very big first quarter out of apple. >> jason, thanks for coming by. still to come, we're sitting down with the ceo of a hot new starter that just might be the yelp for your local grocery store. the ceo of consume r will join s in a few minutes. we're currently up slightly. we've moved upward from the early losses. [ male announcer ] eligible for medicare?

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get a market flash with brian sullivan with cigarette makers victory in court, brian? >> yeah, it's a big victory for now, carl. i'll get into that in just a minute. but here is the headline. the cigarette companies winning in the appeals court in washington, d.c., that says they do not immediate to put graphic picture labels on packages of cigarettes. remember, the government was trying to force the companies to put very graphic photographs on their packages in addition to the text warning. five cigarette companies challenged that. an appeals court, a lower court ruled in favor of the government. this appeals court in washington, d.c., in a two to one decision has ruled in favor of the cigarette companies. but this is going to set up a likely showdown in the supreme court. it may not go to the supreme court, carl.

this may be the end of it and the cigarette companies could come up with a victory here but it's possible that they could appeal. still, a victory from the cigarette companies. they are not actually moving a lot. altria up and philip morris is down. we'll way wait to see if the supreme court appeals. this is an extremely rare courtroom victory. >> okay. thank you very much. and let's stay with discussions about graphic images after what happened to britain's prince harry in vegas didn't stay in vegas, the authority is urging the young royal to, quote, stay calm while it hopes to capitalize on its escapades. check out this full page ad running in many of the newspapers, urging visitors to las vegas to protect the moment. it's part of a new campaign condemning the personal persons

who took the photos of prince harry and reminding potential vacationers that las vegas is about adult freedom according to a convention on visit authorities spokesperson. a more compelling development for many will be the fact that in the united kingdom, murdoch rupert's son has now published this photo of prince harry in full, uncensored. >> going against the grain. >> i'm sure the british public is lapping it up. >> yes. and in the las vegas sands basically saying, know the code. that's their new marketing campaign. there's a code when you go to vegas, which obviously we know, things that go there, stay there. no bottle service, no bikini-clad girls. >> so basically no reason to go to vegas if you're going to do that? >> i think it's a brilliant way to leap off of the news. >> totally. >> meantime, ever wonder how

much those spike in grain prices really impact the food you buy? when we come back, we'll take a deep dive on to the breakfast table and tell you how much the recent egg and stake breakfaeak really costs.

the usda's food outlook prices has been released. it's a good time to look at the grain prices and how they will further impact the food that we purchase. our own jane wells is taking a deep dive on to the breakfast table this morning. good morning, jane. >> hey, simon. i'm going to throw a lot of numbers out at you. first, what's for breakfast? i cooked it myself so you may not be edible. we have steak, bacon, eggs. and i spoke to an egg producer and asked them a basic equation. how much corn to you feed an animal over its life span? let's start with the steak. a steer gets 3200 pounds of corn and 600 pounds of meat, 5.3 pounds of corn per 1 pound of beef. based on the usda's average retail price coming out today of $6.90 a steak, that's a little more than 10% of that steak is the cost of corn.

all right. next, eggs. a hen gets 4600 pounds of corn a year, pro us dos 250 ends per year and i have 5 cents of corn, 3% of the retail price. corn gets you a two to one ratio. and my half pound of bacon, mmm, is slightly more than a pound of corn. finally, milk, cow on average delivers 5800 gallons of milk and work out to 2 cents per 8 ounce glass. you'll notice anything having to do with cattle has a lot higher percentage of corn in the cost. add it all up, i have just about a dollars worth of corn in this breakfast which retails for about $9.57. so just about 10% of the cost of this breakfast is just corn. and that doesn't include what it

costs to feed the mothers of these animals while they were feeding them. what it cost to feed the dairy cow. on the other hand, that's assuming that all of the producers pay a full price of corn when it was $5 a bushel. have you got that? >> your math is extraordinary. >> she did it in her head now. >> i only have to check it ten times. >> wow. well done, j. >> what do you call this breakfast? heart attack on a plate? >> i call it tapatio. this is the only thing here that does not have any corn in it. so more tapatio. by the way, it's good for colds. >> the rest is just a tool, a vehicle for the sauce. we know you like things spicy. we'll talk to you later. thank you so much, jane wells in los angeles. >> when you go to the grocery store, do you often feel overwhelmed with so many products and brands to choose from? help is on the way with a

company called consumer that is an app where you can instantly products on the shelves. joining us is ryan charles, ceo and co-founder of consumer. welcome. >> welcome. >> you're no stranger to mobile. you worked for zagat mobile before you left. what is different about this product? >> we're actually giving a voice to consumers when they're shopping at supermarkets and drug stores. there's not a lot of information about these products. you have to rely on the packaging itself and sort of the marketing speak. what we're doing is actually creating some transparency. we're talking to people just like you and me, getting that information together, and putting it in a mobile app so you can instantly find out more about a product. >> essentially scan the bar code and it gives you all these reviews, 10,000 downloads or so? >> actually, over 100,000 downloads. >> and all basically highly rated. >> highly rated application, 4.5 stars and cover over 150,000 products you can buy ranging from health, beauty, grocery and

baby products. >> you aggregate reviews across the internet or sent directly in to you with zagat? >> they are reviews sent directly to us using the mobile application. >> how can you achieve critical mass on any given product given there are thousands of products in grocery and drug stores? >> the key is distribution. so right now being in the iphone app store and being a top app has enabled people to download the application and instantly start creating content. what's great about this bar code scanning is you can go into your pantry or bathroom and just start scanning, you know, dozens of products and start creating reviews. that creates mass quickly. >> how do you make money? >> so we don't make money currently. the plan is to actually monetize the platform through offers and deals. imagine when you have a mobile application and someone is using it to research or make a decision about a product, if you see an offer at that time you're likely to convert if there's a deal or discount, makes a lot

more sense than let's say you're in a social network and looking at photos of your friends. >> is this -- i wonder, i would have thought that actually most people would be more interested in connecting with the manufacturer of the product and saying hey, what deal can you do for me or coupon on my screen. that's the business might migrate rather than the social element. >> i think the idea there are a lot of different factors around the decision-making process. price is one but quality and effectiveness. if you're going to buy a product for your child, right, or say it's for your skin or face, obviously the quality and the effectiveness of the product is first and foremost. we'll start you out there and then expand from that. >> how does the manufacturer, i mean it seems like the manufacturer if they chose to could do exactly what you're doing because if you're scanning a particular bar code of this cup, you're not comparing this cup versus another cup. you're actually seeking information on a particular cup and might be more inclined to

buy that particular cup, so a manufacturer can go in and offer the same sort of service that you do and offer the coupon. >> i think the difference is we have all these products in aggregate. you're not going to download a different app for each manufacturer. you're going to have one app on your iphone you will open up when you walk into a supermarket or drug store and all in one centralized place, the same way yelp and tripadviser have done for their industries. >> would display ads be a way to play this? could you have pg&e trying to put ads on the site as shoppers are going up and down the aisles? >> absolutely. i think the key to doing that is being context all. if you're in the baby aisle and see an advertisement for a baby formula, and there's a discount, you're going to be very receptive to that. it's beneficial for the brand, the manufacturer and the consumer as well. >> so what's the barriers to entry? say this becomes a fantastic

business. what's to stop somebody else from doing the same thing or employing as we've seen with google, zagat and stuff, expert reviews? >> well, i think the idea is that there's so many, so many products, literally 150,000 in our system, it would be difficult to have a handful of experts go in and rate all of those products. when you open this up to sort of the wisdom of the crowds, right, where millions of people can download an iphone app and start rating from their apartment or home in san francisco n miami, in new york, you now have an ability to, you know, basically have information about hundreds of thousands of products and do that -- >> i could see this as being a function on facebook as a mobile application that would access its social network of hundreds of millions of people. that would be quite detrimental to your business, isn't it? >> >> right now we actually integrate with facebook directly. for example, if you've integrated with football facebook on our application you can see what your friends have

reviewed. maybe another mom has picked out another diaper and they're recommending that or someone recommending a moisturizer or frozen food. the information from facebook actually helps us when it comes to sort of connecting the social graph. >> well, grocery shopping will take five hours after this, right? we're going to be in there forever. >> that's the key to the app, why we did bar code scanning, takes you two seconds to bring up all that information and then you can save those items to a list so you can remember them in the future so now you know this is the great hair care product i bought or, you know, create a list beforehand and say okay these are the products i want to buy, find the best of these. >> should integrate with amazon so they can put everything in your cart and it can be delivered. >> right. the key to this actually is we wanted to focus this on brick and mortar retail. when it comes to consumer packaged goods, 95 plus percent being sold at brick and mortar retail. very different than let's say electronics or books, things that amazon specializes in. to help people at retail we said

let's create a mobile application that's going to empower consumers. >> yeah. brian, interesting stuff. thanks for coming in. >> thank you so much. >> brian charles, the firm is called consumer without the e, right. >> no e, no u. however you search for it in the app store we'll come up. >> thanks so much. >> time for squawk on the tweet. they say they know the late steve jobs said to be living in parallel universal, mid level angel and half yak. we're asking if you could meet one of history's foremost past business leaders who would it be and what would you ask him or her. steve tweets lee i ya coka, how did you ever get anyone to buy a k car. thomas watson, former ceo of ibm, navigated ibm through the depression and two world wars, i would like to ask him how he did that. tim tweets i would ask steve jobs what's the one thing he would change or do over again with apple. all good ones there. >> those are good.

>> okay. banks posting recent run-ups, now the time to book some profits? "squawk on the street" will be right back. you know what i love about this country?

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street,". want to quickly update you on the shooting outside the empire state building.

mary thompson has the latest on that this morning. >> just to recap, two dead in the wake of that shooting including the gunman and, of course, another victim. eight others injured, some sustaining gun-related injuries. this according to our sister station wnbc in new york, was the result of a disgruntled worker. it was not an act of terrorism. coming up at 11:00 eastern, the new york city's mayor and police commissioner will be holding a press conference and we will be bringing that to you live right here on cnbc. back to you. >> the mayor, generally has most of the details at his finger tips when he does speak. thanks for that. mary thompson, back at hq. just joining us this morning, here's what you might have missed earlier today. >> welcome to hour three of "squawk on the street." what's happening so far. >> unless we change patent law in the united states, around drugs like this, we're never going to have the incentive that is necessary for companies to develop these drugs. >> i think it is probably not

reasonable to think that we're going to have a repeal of this law. it with you a huge law, it was very difficult to get through, and so i think it's unlikely -- >> even under republican administration. >> even under republican -- >> with regards to the fiscal cliff i don't think there is monetary policy powerful enough to prevent the u.s. from entering a recession in the first six months of next year if the fiscal cliff goes off. >> it is ridiculously fast. >> really? >> compared to the prior iterati iteration. >> more address on it? >> i haven't seen as many ads. about it being an incremental step toward mobile making these things -- >> that's the biggest problem for all these companies, how to monetize mobile. >> a crowded session at the big board, the opening bell. >> i just think that the market's a little bit ahead of itself. valuations aren't excessive but for us and what we're doing this is about where we ought to be at the end of the year, not in august. >> once you commit to the iphone you've got your photos in there, your music.

with icloud, tethering you more tightly. the idea of switching a phone used to be when you switched a phone the worst thing you had to update your contacts. now you have to change everything about your life. so customers kind of go in but they don't come out. >> good friday morning. live here at the new york stock exchange. a check on the markets, the dow after four straight down days getting a little back today up 34 points. s&p is up to 1404, nasdaq up almost 9, 3,062. treatment for alzheimer's disease from lily failing to slow mental decline in two separate studies of patients with mild to moderate cases of that condition. they will discuss results with regulators and discuss the next results. shares of salesforce.com providing an upbeat second quarter number but offering a number that fell below expectations. citing slowing tech spending in europe as a crimp to margins. let's get the road map for the next hour.

profit taking thursday turning into profit taking friday has the rally run up too far too fast? what's to be made of all this chatter surrounding the seasonally weak month of september. we've got a top ranked panel to lay it out. the big banks seeing solid gains in the past several months. "the new york times" out with a good piece yesterday in defense of not breaking up the nation's largest financials. what's next for the banks? tropical storm isaac, fast approaching hurricane strength and threatening to dampen the rnc. we're going to baton down the hatches while we go inside the agenda for the gop. first, though, holdings power struggle heating up even more. our kate kelly has the latest on that. >> thanks so much. hatch an hour left in the london trading day the clock may be running out for what promised to be the biggest deal. the commodity trader of x strat ta. qatar holdings is one of their

biggest shareholders has batted down that price, saying it should be $3.75 shares instead. qatar burst on the scene and has been adding to the position daily. reporting an increased stake as recently this morning of about 12.1%, now enough to single handily block the shareholder vote on the merger which takes place two weeks from today, september 7th. the proxy adviser shareholder services which advises xstrat ta to vote down the deal say a higher premium really is necessary. >> i think 3.25 would have got an lot of investors on board. i'm not sure that was the magic number. seems like the number is higher than 2.8. i don't know if it had to get all wait to 3.25. i think a lot of them would have been really pleased with that but thought it was a good deal somewhere in the middle there. >> but london takeover policies require that an increased bid would have needed to be announced by today, guys, when with the clock ticking as we

speak, glen corp has remained silent on the issue. >> thank you for bringing us up to speed on that. average -- major averages remaining flat going into the weekend. jackson hole a week away. how should you be positioned next week? carl is the senior economicist at deutsch and happy friday to both of you. >> yes, good morning. >> david, beginning to hear anecdotal tales of strategists who will come on our air from time to time exiting a lot of their long equity positions. obviously having enjoyed a pretty good summer rally. looking for reasons to be positive going into next week, are there any? >> oh, yeah. valuations really is the story. the fundamental question a long-term investor has to ask themselves here, are we going to see another crisis. if we don't see another crisis, valuations are still so extreme between fixed incomes and equities you just play the valuation game, take advantage

of some good dividend paying stocks and stocks in general and over time the pendulum of motion will come back and the global economy will get to stronger growth. so i think there are reasons for long-term investors to be pretty positive here. >> as long as there's not another crisis. david, are you seeing signs that the threat of that is, in fact, being mitigated? we're seeing more rhetoric and rumors we should mention swirl between the meetings with angela merkel and the greek prime minister? >> i think what europe is trying to say is we're not going to give more money to greece but we will give you more time to implement whatever you're going to implement. i don't think there's much hope that greece would be able to turn around its fiscal situation or economy, but if you can keep greece just motoring along on life support for a few years while the rest of europe get the its act together greece becomes less of a problem for europe and the world. >> carl, do you agree? market still cheap? >> well, i agree with his long

run view that is fairly constructive on the outlook both for the u.s. and global economy. in the short run, september could certainly be an interesting month as we gauge what the ecb is going to do. i know there were stories coming out this morning on the news wire talking about a temporary greek exit from the currency block. i think that this would be, you know, a big problem and potentially if it's not handled well could be disruptive to the european economic outlook and in turn the broader global outlook. >> yeah. i mean what kind of odds would you put on that? you're referring to headlines today that say maybe they don't get a divorce necessarily, but they get a brief separation. you think that would be disruptive? >> you know, if it's executed perfectly then it could be effective, but i think the odds of executing it perfectly and then the nondisruptive fashion, you know, are pretty substantial. >> david, you know, looking at

fund mentals to the degree we can do that claims are still close to their lows for the year, housing people excited about that, even some weird metrics like the s&p ratio relatively bullish. do you put stock in those or not? >> the number one thing i'm looking at is home prices. if you look at both the existing home sales report this week and also the fhfa report both of them show the strongest gains in home prices seen since 2006 on the year-over-year basis. that is the key to getting this economy to do better. if home prices do better, improve consumer confidence, improvement in household equity, get more buildings, get some more landings. i don't think the u.s. economy -- the u.s. economy is rumbling ahead in first or second gear right now. that's all it's doing. i think it can do a little better. i don't think it's going to stall out. valuations are so extreme right now that i would be constructive at this stage. >> all right. it's going to be likely a little more choppy but still very interesting. carl, david, thanks for your time. have a god weekend.

>> thank you. >> to rick santelli who has his own pro mo on our air. good morning, carl. we always have had discussions in the past about how markets had high correlations and how that made things a little bit difficult because, you know, if you're a trader you want to diversify your positions. even though to some extent it's true today, not nearly as much so, there's a lot of muddy markets these days and i would like to go through them and we'll go through them slowly and i think you'll find it as fascinating as i did. when it comes to interest rates to try to get a handle on exactly where they're going, let's look at this year-to-date chart of ten-year deals. not that it's dissimilar from our, but it's a cleaner chart to express my point. the right-hand side slower than the left. rates are lower than they closed last year. look at that defined range on the right side. the boons are telling me we're

probably not going to see a huge run in rates for the rest of the year and maybe the high probability is a range biased to being, of course, selling the upper end and looking for congestion in the high one teens. it kind of fits with the boons and the tenure in this country. let's take a different glance. two year in swiss. the reason this is important, there are many people out there that think the real trade if you want to maximize on interest rates are yield curves. and nothing defines this better than a two-year swiss. you can see that it was definitely starting to move down at the beginning of the year through zero and then in may it plunged. now let's switch gears to other muddy markets. let's look at the foreign exchange side. if you look at the euro versus the dollar you can see year-to-date that the euro is definitely lower. the right side shows something different is going on. of late, it's moving up. why is this counterintuitive? in this country put the next chart on at the dollar index, any time we've mentioned of qe, we see that the dollar gets

weak. you have mario draghi screaming about potential quantitative easing and the euro is going up. this is fascinating, "the wall street journal" has an interesting story about the changing dynamics of the euro but really don't answer any of the important questions. now the third one, these are also fascinating and comes back to the idea of stocks. we look at the first one, the shanghai composite in china. this one, obviously, carl talks about everythingry morning, under significant pressure. if you look at the stock markets in germany, the dax and in the u.s. they look similar. the reason this is important is, because when we looked at the big trade deficit widening in japan, the initial story said oh, it's a story about china and their demand falling. other stories may be more accurate. no, it's more of a function to the japanese exports to europe. but in either case, anybody who wants a factor in models right now that chinese stock market has to factor in predominantly and in terms of the dax the real

question, is it on borrowed time and that's the way many traders here talk about it. hope the waters are a little less murky. back to you. >> that does help a lot. and a lot of people including kudlow watching china closely, rick. talk to you in a while. rick santelli. >> banks seeing pretty solid gains over the last three months. a look at the kdw. is it time to buy the financials or get some of the profits. we'll get to trades in just a moment. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person.

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one year ago warren buffett invested $5 billion into bank of america when shares were at $6.30. how much money has the oracle of omaha made? she's back with math on that. >> i don't think anyone thought i knew how to do math but i do. to a certain extent when you think about warren buffett, him investing in a stock is a self-fulfilling prophecy, goes up just on the news he's bought a stake. in this case b of a rose 26% on date it was announced, netting the oracle $1.3 billion on paper in one day. bank of america shares are up 16%, but it's seen a rocky road in the meantime at times sinking be5 bucks a share, sometimes above $10 a share. buffet is not investing just in the shares. having previous good fortune on preferred equity investments his b of a deal follows a similar structure. first auto 50,000 shares at

$100,000 apiece and dividend at 6% on that. he received warrants to purchase b of a stock if he wants to at $7.15 a share any time in the next ten years. on the dividend alone buffet has collected around $300 million just this year. and considering b of a's current price of $8.09 a share, his warrants are in the money, worth a total of $5.66 billion, a gain of $662 million. if he cashed it out now he would get a $250 million premium, bringing his total for this investment at over $11 billion. according to second quarter filings, though, berkshire hathaway had a carrying value of $18.6 billion for all its investments including similar injections at goldman sachs, wrigley, and dow chemical. and berkshire collected $1.86 billion in investment flk which includes the b of a dividend. keep in mind his warrants could still fall out of the money if those b of a shares dropped but his gains at least on paper look

pretty good so far. not bad for an idea that just comes to you in the bathtub, right. >> as he has said. only warren can get some of these kinds of deals. thanks so much. kayla tausche at hq. keeping the focus on the banks after the run up is now th to book profits? want to join paul miller this morning, managing director and head of financial institutions research over at fbr in arlington. welcome back. >> thank you. >> let's talk b of a since talking about buffet, nice gain, but doesn't sound like you're too much of a fan of the stock overall? >> no. i always go back to that point, they still have a lot of liability es special list with the gses and private label side that has to go through the court system. it's really difficult to analyze what the overall liability of all these bad loans that really countrywide did years ago. we're still on the sidelines. there has been some volatility it bottomed out at five, up a dollar i think in the last couple weeks as bank stocks have done very well.

we're still on the sidelines at bank of america and we would recommend people take profits at this level. >> new board members don't really move you. you call it a dead bank in some ways. >> i do call it a dead bank because of all these liabilities unable to get rid of. the core operations of b of a is fine. all these liabilities. but you know, the different board members don't excite me. i'm disappointed in the board's behavior of all banks. i don't think they're as proactive as they need to be and with a big turnover at bank of america, shows you the difficulty these board members are running a bank. it's not fun running a bank that doesn't make a lot of money. i think i would continue to see a lot of turnover in that board. >> yeah. some might argue it's not fun running banks that do make money these days. that's a different story. you like wells, usb, pnc, fifth third but even after the run-up would you hang on, buy more? >> you know what, i think right now i would, you know, these guys will probably outperform most of the other institutions because those names have strong

mortgage banking revenue which is going to probably persist for another year, year and a half maybe. those names i would hold on to. i definitely would hold on to them. and some of the poorer quality names like a sun trust or key, that's where i'll take my profits. >> all right. paul appreciate your time. paul miller joining us talking banks. i want to get to steve liesman with breaking news that is moving the markets. >> thanks very much, carl. fed chairman ben bernanke in written response to questions from representative darrell issa, saying that there is scope for further fed action by the fed to ease financial conditions. he's saying the benefits of further action must however be balanced against caution. see the market looks like it got a pop on that, looking at that now. bernanke is defending overall fed policy but saying monetary policy is not a pan see ya and calling on lawmakers and other institutions in the government to do their part to help the economy. asked by darrell issa about whether or not the effects of

operation twist were still working its way through the system he says they, indeed, are and the fed must also make policy in light of economic forecasts. the fed bond buying he says helped promote a stronger recovery and the fed is akeenly attuned to the risks of inflation. it's a very long q and a, i guess darrell issa gave as many as 22 questions. i've gotten through 20 of them, carl, and if there's anything more i'll let you know. that's the gist of the letter that the market seems to be very excited about. >> coinciding, steve, with the headline i'm not sure you've seen out of reuters, the ecb is mulling some target bands for bond yields. >> do you know the sourcing on that? i mean we haven't had any good sourcing on a story like that. >> i think i saw one headline citing sen bank sources. >> we did have a source a central bank official aware of the situation when that story came out yesterday and that's one of the ways they may go

about this, the way that the ecb would come in to purchase the bonds on the short end of the curve of those countries that ask for esf help has been a matter of speculation in the market. would it be a band, a target of a spread, an actual interest rate. everybody's been gaming that out. we know that they're coming in. not exactly clear how much the process really matters. the key being whether or not the central bank is closer to doing it would be the effect of those things. i think ultimately it may be ecb action that could have as much of an effect as anything in this letter, carl. let's do the tale of the tape, minutes came out and made everybody think the fed was closer. we had james on yesterday from st. louis suggesting maybe they were not as close to doing qe as expected and here's fed chairman ben bernanke saying look there is scope for further fed action and this could help the recovery, carl. >> okay. steve, thank you for that. >> sure. >> take you to midtown manhattan, mayor bloomberg and

commissioner ray kelly of the nypd. >> earlier this morning, little after 9:00 a.m., a man who had been fired from his job about a year or so, began shooting near the empire state building, but out on the street. he killed one person and at least nine other people were shot, and some may have been shot accidentally by police officers who responded immediately and while confronting the suspect and fatally shooting him, unfortunately there may have been other victims as well. all of those are not seriously wounded and there is no expectation that any of them will do anything other than recover quickly. i ask everyone to keep the victims in their thoughts and in their prayers. this is a terrible tragedy and there's no doubt that the situation would have been even more tragic but for some extraordinary acts of heroism. every day as you know our police officers put their lives on the line to protect us.

they did so again today, responding immediately and they were joined by a number of civilians whose bravery and assistance probably also saved lives. new york city as you know is the safest big city in the country and we're on pace to have a record low number of murders this year but we are not immune to the national problem of gun violence. let me now turn it over to commissioner kelly. ray? >> thank you, mr. mayor. i want to stress that what we have is preliminary information and it's ongoing investigation, of course. at 9:03 this morning, in front of 10 west 33rd street, a disgruntled former employee of a company at that address, shot and killed a former co-worker, striking him three times. the subject, jeffrey johnson, age 53, then fled eastbound on west 33rd street to 5th avenue when he walked nobody northbound

along the curb line with a ..45 caliber handgun secured in a black bag he had under his arm. a construction worker who had followed johnson from west 33rd street, alerted two uniformed police officers who were on post in front of the empire state building's 5th avenue entrance. as part of our counter terrorism coverage. as the two officers approached johnson he pulled his .45 semiautomatic pistol from his bag and fired on the officers who returned fire, killing him. an additional nine individuals were either wounded or grazed during the exchange. six of whom were removed to bellview hospital and three to new york presbyterian cornell medical center. all are not likely to die. johnson had been employed for six years at hazan imports as

designer of women's accessory. during a downsizing at the company about a year ago, johnson was laid off. in a dispute with one of the former employees of hazan, in front of the building, johnson produced a pistol and fired at close rage. striking his 41-year-old victim in the head. we're withholding the victim's identity until family notifications can be made. the area in and around the empire state building remains an active crime scene with fifth avenue closed from just below 42nd street to 33rd street. 33rd street is closed between madison avenue and the avenue of americas. 34th street is closed between seventh and madison avenue. mr. mayor? >> let me just stress that this is the beginning of an investigation. there were a lot of people that

were injured, two are dead, the perpetrator and his victim. nobody else, thank god. but the rest is -- we're doing an investigation. we'll be happy to take a few questions but i'm not sure we know any more than what i've said. yes, sir. >> [ inaudible ]. >> there does not appear -- he does not appear to have a criminal record but it is at the very beginning of our investigation. >> [ inaudible ]. >> we don't know very much about him. we're just starting the investigation, trying to fill you in because the public is concerned and they should be. but we just don't know yet about the victim or what interaction had occurred, whether there was any between the victim and the murderer. yes, miss. >> [ inaudible ] that were shot? >> do we know the ages of anybody? >> yes. the shooter was 53 years of age. the person who was killed is 41 years of age. >> any of the others? >> children? >> there were no children, no

children who were shot. i would say -- and no elderly people. people -- middle age range. >> i'm sorry? >> how many men, how many women? >> i believe there are two women and seven men. >> yes, sir. >> at this time between the first shooting [ inaudible ] by police, do you have any idea what the time frame? >> walked a block maybe, something like that. because the police were there on their usual counterterrorism assignments. saw this, went after him, construction worker helped identify them. they approached. the guy pulled a gun and tried to shoot the cops and kill the cops and the cops returned fire and he is dead. the perpetrator is dead. yes? >> clarify how many weapons the -- >> we don't -- we think there's only two or there's only one weapon from the perpetrator and then, of course, the police officers in defending themselves. yes? >> any information about the

gun? how he got ahold of it? a license? >> we have no information, miss. that's the trouble. we'll be happy -- as we get information later in the day, one police will put it out. it's at the preliminary times and we don't want to speculate on everything. we know the number of people shot and we do know that the victim is dead and that the perpetrator is dead. yes, sir. >> where was the construction worker and do we know who he is and is he the hero in this? >> i don't know. we all use the words hero. he did what he should have done. he identified what he saw to the police. when he saw something he said something and turned it over to the professionals and that's that. yes? >> did you say the shots were fired by the police [ inaudible ]. >> we don't know. there's speculation that that's what happened. but we do know that the -- we have on tape the perpetrator pulled his gun out and tried to shoot at the cops. whether he got off any bullets or not, to be determined. how many he shot earlier, to be determined. we do know that the cops fired

back. the tape clearly shows the guy has the gun out trying to kill the police officers. >> [ inaudible ]. >> we just said he worked for an apparel company, women's apparel. >> yes. >> the officer fired? >> still under investigation. we don't know. the details are going to change and later on today when pd will put it out. we don't want to give misinformation. >> what are the officers in the process of doing right now and how long does this perimeter -- >> it's going to take a while. we always look for shell casings well, look for witnesses, we look at videos from buildings, security cameras. the police go through a time hone checklist of looking for evidence without destroying anything and getting as many witnesses of anybody seeing anything, if you call the police department, call 311 and they'll connect you with the appropriate people and we'd love to have every bit of information. we'll take one or who more because we're just going about the same things.

>> say anything commissioner? >> we don't think the government said -- the government -- the -- not as far -- >> unknown at this time. >> it happened very quickly, very recently. >> mayor mike bloomberg and nypd commissioner ray kelly with a relatively comprehensive list of details about this 53-year-old man male who gunned down a co-worker after he was laid off. police were alerted, approached him, he pulled a gun and a gun fight ensued. nine wounded or grazed. one dead. the shooter dead who worked for a manufacturer of women's accessories. as more details come in we will get those to you. "squawk on the street" is back in a moment. in your car. now count the number of buttons on your tablet. isn't it time the automobile advanced? introducing cue in the all-new cadillac xts.

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we continue to monitor the developments on the shooting outside the empire state building. at the same time the flow of news out of europe in the past ten, 20 minutes has been remarkable. >> you called me out. >> these reuters headlines talking about a potential target band on yields from the ecb that would come no sooner than the september 6th meeting. >> i've been discussing that with london. i'm not sure how much is new. because mario draghi said he was going to have a process where he would ask all the committees, all the experts what nonstandard measures can we come up with. the fact that this is under discussion is blindingly obvious

because that's what draghi said he would do. reuters is pummeling away on this idea that spain is negotiating a bailout again. the deputy prime minister of spain emphatically denied yes there's a bailout of the banks but not in negotiations for something broader at the sovereign debt level. if that were to come about that would be quite positive. while we were in that news conference we did shut down in europe. across the board it's relatively flat overall. we were down actually but the moves that we've had on wall street now up 79 points on the dow from the earlier losses. it's actually pulled europe higher into the close. the biggest news potential was on the meeting between angela merkel and the new greek prime minister samaras. he didn't get what he went to berlin for. she gave him nothing, basically. no grounds on the idea that they should allow athens to have more time to hit its budget deficit

targets. as he said it we're not asking for more money we're asking for breaths of air in the dive we're taking. she gave him absolutely nothing. we will wait and see what the report says towards the end of next month. so a big kick of that can down the road. presumably samaras will get the same treatment when he meets the french president tomorrow because merkel and holland chatted yesterday on the common position should be. we are inching a kind of policy vacuum for world markets because there's nothing next week until jackson hole when we get something possibly from bernanke and the week after that the ecb meeting and a huge number of summits between the italians and spanish and germans and french would could advance this or not as the case may be. we're basically booking profits in a number of key areas today. the global minors are lower. the data out of europe, does

indicate that euro zone is going back into recession. a look at some of the banks. some of the banks were down. the spanish bank is spiking higher, i don't know why that is. you see in general terms there was a negative tone to the banks today. but i do at the end of the week want to emphasize the context in which we're operating since we got draghi saying he would do all needed to save the euro you have this huge rally in stocks. we are just booking profits on that at the top as you can see. from the 26th of july, this is the day before the 25th of july, still up 13% in europe and that is the broader rally on low volume but you see the move. we're mentioning against that you have seen this rally this week on treasuries and bonds and that is an indication, perhaps, that the market is getting more nervous. as they rally you can see the yields beginning to come down on the german ten year. the good news on the bond market is that you haven't seen that equally reflected in an

unwinding of the gains in the spanish markets. still the yields in spain remain relatively low. we haven't seen the spike up on that and for all investors around the world unless you're shorting europe, that also is a relatively good sign. >> yeah. >> decent spike in the euro on this news. see you later. to rick santelli in chicago with a special guest as well. rick? >> hey, carl. we're going to continue with the same conversation. that's good tv, real time. we're going with the issues. we notice you can see viewers show a chart of ten-year note yields when the news came out being discussed regarding maybe bands on that buying, is it going to be based on yields, on spreads? look at what happened with the dow jones. it also spiked up. dan, i think this is significant because, you know, we could talk about spanish yields, but how many people you know that in mass are trading it. but in mass, there's a lot of trading going on traditional fixed income and equities. >> that's correct. >> what's going on in europe

going to have an outsized influence reversing the safe harbor in rates and pushing equities a lot higher? >> it's going to do a lot of things. if you can get the idea it is going to work somewhat -- >> i don't think it's going to work. let's operate on the assumption of the here and now, they're talking about things the market likes. >> which the market thinks might work. as a result you're going to see some confidence in our markets right now. the biggest drawback in our markets of late has been what's been going on in europe and china. europe right now is the big issue. if they can come up with a perceived solution and make it look like we're a little more comfortable over here or over there, we'll be more comfortable here. >> okay. so you know, what do you tell your clients or trade your own portfolio? seems to me that equities will be the way to fly if you want to look at -- if europe gets their house in order and stabilizes it equities could take off. >> if they were able to, i was confident, 100% confident that europe could get their house in order i would be going all in.

i'm not. it's a perceived solution. we've got to see if there's teeth behind it and whether or not it will work. i don't have confidence right now. >> you brought up an answer i find important as well. the financials. because the difference between if the new focus is on preventing a recession which stabilizing their credit and sov vensy issues you will get a different market response. explain. >> if you see the spanish banks stabilize and the italian banks stabilize it's not going to have as much of an impact as ours. when you saw all of those banks or perceived countries failing, our banks were getting hammered and that scares the heck out of this market because then you might have a whole collapse of the financial system. i don't think it will happen. but the perception is there. if we see the help with the spanish and the italian governments -- >> funding coming down. >> then that will stabilize us some, help our financial institutions here which will obviously help our stock market. >> at least for the next month or so what it sounds like you're saying if we don't see any major

flattening in spain by big stock markets like the dax and u.s., be careful because you might have to sell tens and boons again even though they seemed to have rallied the last three or four days. back to you. >> rick santelli in chicago. when we come back, the republican national convention starts on monday. we have a preview of the most important issues for the gop party next week. plus, tropical storm isaac still threatening to crash the convention, it is raining again. we will track the storm right after this break. road trip buddy. let's put some music on.

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i guess that's good news, carl. see you at the top of the hour. >> sounds good, scott. we have seen a bit of a turnaround here after moderate weakness at the open of the session. dow is up 64, nasdaq 12, s&p up 5. largely coming off of a headline in which the chairman of the federal reserve wrote a letter to house oversight committee darrell issa saying there is a scope for further action by the fed. that's borrowing language largely from the minutes we saw the other day. market seems to like that, although we are a little off the highs. tropical storm isaac making its way towards florida as preparations for the republican convention in tampa enter the final stretch. the storm is said to be gaining major strength. todd santos tracking that for the weather channel. how bad is it going to be? >> carl, that's the big question, especially as the stism gets into the gulf and its window for true strengthening over the next couple days. it is stronger than what we had this time yesterday at this point, we were still talking about a 40-mile-per-hour storm, now at 60 miles per hour

sustained winds, west/northwest at 14. that burst of convection earlier on in this loop, it's a 12-hour loop, that helped generate some more of the thunderstorm activity, some of that has died down a little bit but now looking at strengthening and filling in that area across the northwest side of the system. you're talking about a strengthening system at that point especially once you get over into the area southeastern cuba, the thing is once it avoids cuba, get away from cuba, i should say, eastern gulf this is the best chance area to see some development and that's the point where the hurricane center has the system getting close again to hurricane strength. with a system this wide is that even if the center of the system tracked up the western side of that cone, you could still have chances for some pretty potent thunderstorm activity across eastern portions of florida. with the rnc in tampa that's concerns for them as they get into tuesday and wednesday. a lot of the models clustering at least to the center and eastern portion of the gulf. so as far as the threat is concerned, right now haiti and the dominican republic, puerto

rico dealing with the heaviest rainfall. some of the areas we want to make sure people are aware would be the central portion of the gulf through a good stretch of the northern gulf coast into almost the entire stretch of the florida spence la. keep in mind you could be dealing with effects of this system into the early half of this coming week. on the water vapor imagery i wanted to show this dip in the jet stream there the trough that could actually drive the system or pull the system north up into the eastern portion of the gulf of mexico and we showed these models to give you an idea of let's say the confidence level in our forecast. when all those lines in good agreement you have a pretty good consensus. once you get to the latter half where you see more divergence. still uncertainty to how strong the system could be and where it's going to be once it enters the gulf. does look like good agreement to put it in a good spot for some future development as we get early this coming week. >> yeah. we talk about tampa but a lot of other times don't want to see isaac come either. todd santos at the weather

channel. >> what is on the agenda as the rnc kicks off in tampa on monday. what you need to know right after this break.

from the bad weather set to hit the republican convention to the gop agenda, a panel of experts to get some sense what to watch. chuck is managing director at capital alpha partner and cnbc contributor sara is chief political strategist the white house political director for president george w. bush. good morning to you. happy friday. >> good morning. >> thank you. chuck begin with you, we know conventions are largely about emotion and biography but we have a pretty interesting op-ed out of the governor about his days at bain. others say the fed is going to be at the center of the convention, ron paul supporters. what's going to be the headline, the takeaway headline a week from today? >> let's hope the initial headline isn't about tropical storm isaac. if that's the case the best you might hope for initially is just perseverance in the face of adversity. but carl, i think the really

important thing is that because mitt romney has either refrained from really investing to try to positively define himself and the president has, you know, has basically filled that void and negatively defined him, for whatever reason, he has a bigger challenge and this convention is more important to him, perhaps, than the democratic convention next week. you know, the messaging is going to be extremely important. sara understands that from past cycles. of course the markets i think they believe that the president's likely to be re-elected but they also believe that it's going to be very close, bitter and republicans might take the senate. if we go through this two-week gauntlet and looks like republicans didn't score many points maybe the democrats got the better of it, it might make them think that we're going to have a little bit more of, you know, need more shock absorbers than we're going to have for this end game debate about the fiscal cliff and get into some nasty discussions early next year. >> sara, it's obviously a key

battleground state, one republicans would love to win. would you expect a bounce out of this? >> i don't expect a bounce out of this convention or democratic convention in large part because if you look at the proliferation of news coverage, facebook, twitter, all these social media channels there really isn't much new information that candidates are going to clean glooen from these conventions. past conventions where candidates were not yet defined, where there wasn't as much coverage, you saw about a five-point bounce. i would expect something a little smaller in that range after the republican convention in tampa and maybe less for obama given how defined he is. >> yeah. we're used to seeing conventions happen for a day or two and then the nomination happens. now we know the governor is going to get it on monday. they say this was the plan all along but there's also talk of potentially trying to cut off some of the ron paul sup poortsers at the pass. do you think that's what's behind it? >> i think that makes a lot of

sense and it probably is behind it in part, but i wouldn't expect that the ron paul delegates will make as much of a splash as some might think they are or hope they are. conventions today, given the way the long process of the primary cycle, really don't lend themselves for big, ruckus fights on the floor. i think the selection of paul ryan has helped tremendously with that, given his focus on fiscal issues, given his focus on debt reduction. i think that this is kind of much ado about nothing. >> ryan adds a lot of policy to the theater we're used to these days. chuck, a big discussion about romney, look at his op-ed talking about his days at bain which he says i know how to make tough decisions. on the other hand, "time" magazine this week says the president -- the office of the president is not about choosing which projects to pursue or fund, right? it's about taking problems as

they come and they come quickly and by the dozen. do you think running bain is a legitimate qualification for running the country? >> it is certainly helpful, but i got to tell you, carl, i think the romg campaign needs to get off this monotone vision that alone the resume really quali qualifies him. he needs to connect and make sure that americans can become comfortable with him and believe he has the right qualifications. so yes, i mean knowing how to, you know, expand business and get the private sector muscle working again, is really very important, but i think if we go through a convention and it's mostly about bain and it's mostly about the, you know, the utah olympics, it's going to seem like the 2004 democratic convention where, you know, you saw john kerry essentially trying to, you know, cover some past weaknesses for democrats talking about his military

background and other reasons he should be a good president and really didn't work. >> that's true, sara, then we should prepare for a week of a lot of biography, perhaps a little more talk about mormonism which he's already made a couple steps toward. >> i think you'll see at lot of romney family at this convention. not only ann who i think is speaking on tuesday now, but also his sons and his extended family. really trying -- what the romney campaign will try to do is put some definition around mitt romney the man. we know a lot about his business record, we know he's successful, but what is it that sort of makes him tick as a person. how does he interact with his family. you'll see a lot of that will hopefully allow him to come off more likable than the public perceives him due to the negative advertising that's been waged against him. >> and hopefully the weather does not get in the way as they say. >> yes. >> chuck, sara, thanks so much. have great weekend. i'm sure we'll talk a little

later on. meantime let's get back to mary thompson, the latest on the shooting outside the empire state building this morning following the news conference from the mayor and ray kelly. >> carl, at that news conference, city officials identifying the shooter as 53-year-old jeffrey johnson, a former designer of women's accessories. at about 9:03 this morning they say he entered his former place of employment, hazan imports. he had been fired a year ago. fatally shot a former co-worker and leaving a construction worker alerted police who mayor bloomberg said then approached mr. johnson outside the empire state building. >> he killed one person and at least nine other people were shot and some may have been shot accidentally by police officers who responded immediately and while confronting the suspect and fatally shooting him, unfortunately there may have been other victims as well. >> mayor bloomberg adding those nine victims do not appear to be

critically wounded and are expected to survive. carl, back to you. >> okay. mary, thanks so much. watching the markets pretty nice reversal today. we'll get final thoughts on the moves in the session after this break. [ male announcer ] if you believe the mayan calendar, on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? [ male announcer ] eligible for medicare?

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